MarketGraphics Market Snapshot: January – June Homebuilding Activity

Market Analysis by Joe Zanola (Zanola Company and MarketGraphics Research Group)

Comparative Year to Date Permit Statistics:
The MarketGraphics July 2010 new homes building permit summary reveals increased activity from January – June this year as compared to 2009.  This information reviews the six audited research counties in the Southwest Missouri Region including Barry, Christian, Greene, Stone, Taney, and Webster (full July permit report available here).
2010 year to date new home permits are 625 compared to 475 in 2009, a 31% increase over last year.  It is important to note that the 2010 permit trend is “bouncy”, not predictable rolling monthly pattern.  This may be explained due to start acceleration followed by declines based on tax incentive deadlines.  Additionally, monthly permit ups and downs can be unpredictable in a slowly improving market condition.
What Are The Trends Telling Us?  
It appears that there are three trends in play at this time:
  1. 2010, a slight improvement year.  The stronger new permits in 2010 reflect more buyer activity plus an ongoing absorption of existing new home inventory.  Based on the first 1/2 of 2010 performance and an improving market, it can be expected that more homes will be permitted and started this year compared to 2009.
  2. 2010, front end loaded.  It remains to be seen how successful the homebuyer tax credit will be to re-energize ongoing home buying eagerness. It is apparent that the tax credit expiration has front loaded many buyers into the market that would have probably bought later this year.  It is popular opinion that the next few months of permits are a toss-up until the normal, non-incentivized homebuyer market regroups. 
  3. 2010, buyers reinforced for a deal.  Although the market trend is improving, the homebuyer tax credit program may become regarded as one more incentive that further conditioned homebuyers to expect a “deal”, even when low inventories can justify premium pricing.  Savvy homebuilders now need to discover ways to preserve profitability while at the same time satisfying buyers’ expectations for a deal.  
Real World Success Question—Do you have a strategy to both (1) secure your needed profits and (2) offer a fantastic home that your buyers cannot resist?